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Effects of errors on financial statements For a recent year, the balance sheet for The Campbell Soup Company includes accrued expenses of $553 million. The income before taxes for Campbell for the year was $1,073 million. A. Assume the adjusting entry for $553 million of accrued expenses was not recorded a t the end of the year. By how n1uch would income before taxes have been misstated? B. What is the percentage of the misstatement in (A) to the reported income of $ l,073 million? (Round to one decimal place.)

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Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207

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Chapter
Section
BuyFindarrow_forward

Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207
Chapter 3, Problem 3.22EX
Textbook Problem
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Effects of errors on financial statements

For a recent year, the balance sheet for The Campbell Soup Company includes accrued expenses of $553 million. The income before taxes for Campbell for the year was $1,073 million.

A. Assume the adjusting entry for $553 million of accrued expenses was not recorded a t the end of the year. By how n1uch would income before taxes have been misstated?

B. What is the percentage of the misstatement in (A) to the reported income of $ l,073 million? (Round to one decimal place.)

A.

To determine

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle.  All adjusting entries affect at least one income statement account (revenue or expense), and one balance sheet account (asset or liability).

Accrued expenses:

Accrued expenses refer to the expenses that are incurred but cash is not yet paid.

To determine: The effects on the net income, if the adjusting entry for accrued expense is not recorded.

Explanation of Solution

Accrued expense

Given entry would increase the expense account, and increase the liability account.  If the adjusting entry for accrued expense is not recorded, and it...

B.

To determine
The percentage of the misstatement, if the reported income of Company C is $1,073 million.

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Chapter 3 Solutions

Financial & Managerial Accounting
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Ch. 3 - Account requiring adjustment Indicate with a Yes...Ch. 3 - Type of adjustment Classify the following items as...Ch. 3 - Adjustment for accrued revenues At the end of the...Ch. 3 - Adjustment for accrued expense Prospect Realty Co....Ch. 3 - Adjustment for unearned revenue On June 1, 2018,...Ch. 3 - Adjustment for prepaid expense The prepaid...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Effect of omitting adjustments For the year ending...Ch. 3 - Effect of errors on adjusted trial balance For...Ch. 3 - Classifying types of adjustments Classify the...Ch. 3 - Classifying adjusting entries The following...Ch. 3 - Adjusting entry for accrued fees At the end of the...Ch. 3 - Effect on omitting adjusting entry The adjusting...Ch. 3 - Adjusting entries for accrued salaries Garcia...Ch. 3 - Determining wages paid The wages payable and wages...Ch. 3 - Effect of omitting adjusting entry Accrued...Ch. 3 - Effect of omitting adjusting entry When preparing...Ch. 3 - Adjusting entries for unearned fees The balance in...Ch. 3 - Effect of omitting adjusting entry At the end of...Ch. 3 - Adjusting entry for supplies The balance in the...Ch. 3 - Determining supplies purchased The supplies and...Ch. 3 - Effect of omitting adjusting entry At March 31,...Ch. 3 - Adjusting entries for prepaid insurance The...Ch. 3 - Adjusting entries for prepaid insurance The...Ch. 3 - Adjusting entries for unearned and accrued fees...Ch. 3 - Adjusting entries for p repaid and accrued taxes...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Determining fixed assets book value The balance in...Ch. 3 - Book value of fixed assets In a recent balance...Ch. 3 - Effect s of errors on financial statements For a...Ch. 3 - Effects of errors on financial statements For a...Ch. 3 - Effects of errors on financial statements The...Ch. 3 - Effects of errors on financial statements If the...Ch. 3 - Adjusting entries for depreciation; effect of...Ch. 3 - Adjusting entries from trial balances The...Ch. 3 - Adjusting entries from trial balances The...Ch. 3 - Adjusting entries On March 31, the following data...Ch. 3 - Adjusting entries Selected account balances before...Ch. 3 - Adjusting entries Reliable Repairs Service, an...Ch. 3 - Adjusting entries Good Note Company specializes in...Ch. 3 - Adjusting entries and adjusted trial balances...Ch. 3 - Adjusting entries and errors At the end of April,...Ch. 3 - Adjusting entries On May 31, the following data...Ch. 3 - Adjusting entries Selected account balances before...Ch. 3 - Adjusting entries Crazy Mountain Outfitters Co.,...Ch. 3 - Adjusting entries The Signage Company specializes...Ch. 3 - Adjusting entries and adjusted trial balances...Ch. 3 - Adjusting entries and errors At the end of August,...Ch. 3 - The unadjusted trial balance that you prepared for...Ch. 3 - Continuing Company AnalysisAmazon: Vertical...Ch. 3 - Chipotle: Vertical analysis Chipotle Mexican...Ch. 3 - Nike: Vertical analysis The following data are...Ch. 3 - ATT and Verizon: Vertical analysis The following...Ch. 3 - Ethics in Action Chris P. Bacon is the chief...Ch. 3 - Communication Delta Air Lines is a major passenger...

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